Asked by
To ask Her Majesty’s Government how much money the British
Business Bank has disbursed to financial institutions to support
British businesses through the COVID-19 pandemic.
The Question was considered in a Virtual Proceeding via video
call.
The Parliamentary Under-Secretary of State, Department for
Business, Energy and Industrial Strategy () (Con)
The Coronavirus Business Interruption Loan Scheme and the
Coronavirus Large Business Interruption Loan Scheme have been
developed to provide financial support for UK businesses that
have been impacted by the coronavirus outbreak. There will be no
limit on the number or aggregate value of loans that lenders can
issue through these schemes. As of 29 April, over 25,000 loans,
worth over £4 billion, have been provided to businesses under the
two schemes.
(LD)
My Lords, this money is needed urgently, yet many businesses are
encountering problems in getting access to it. For example,
long-standing and profitable firms whose cash flow was perfect
before the Covid-19 outbreak now apply to banks and are told that
they cannot have the money because they do not have the cash
flow. This is a Catch-22 situation. It is supposed to be
emergency assistance. The Treasury issues guidance but on the
grounds the banks are dragging their heels. Unless that culture
is changed, good businesses will go to the wall. What are the
Government doing to lean on the banks to change this very
damaging culture?
I thank the noble Lord for his question; he makes a good point.
We have received lots of helpful feedback from stakeholders on
how the schemes have been working. He will be aware that, on
Monday, the Chancellor announced further steps to ensure that
lenders have the confidence they need to process these
applications. We have removed the forward-looking viability test
and the per-lender portfolio cap, to give lenders the full 80%
guarantee across all CBILS lending. We keep the scheme under
constant monitoring and are available for any future changes.
(CB)
My Lords, although business is very grateful for the help that
the Government are giving, including the new bounce-back loans,
which are 100% guaranteed up to £50,000, the Minister said that
just £4 billion has been given to 25,000 companies in the six
weeks since the scheme launched. Will the Government consider
guaranteeing up to £500,000 for 100% of the banks, as the Swiss
and the Germans have? This will ensure that the money gets
through to the companies that need the money now to survive this
crisis and then the revival and restart. Will he also confirm
that the portfolio guarantee limit of 60% per bank has been
removed, and that it is 80% or 100% back to back?
The new bounce-back loan scheme that the noble Lord referred to
will ensure that the smallest businesses can access loans from
£2,000 to up to £50,000 in a matter of just days, capped at 25%
of the firm’s turnover. On his second point, we have also removed
the portfolio cap for loans under the CBIL scheme, meaning that
lenders can access the full 80% guarantee for each loan.
(Con)
My Lords, I too have spoken to a large number of businesses that
are trying to get CBILS loans. The reality is that they are just
not able to get them; they are being turned down. Will the
Government consider two suggestions: first, that the government
guarantee is for the first 80% of the loan, not pro-rata but for
the initial amount; and, secondly, that the current restrictions
on EIS and ECT investments in businesses are relaxed, despite EU
restrictions, and the set-off rates against income tax are
increased? I appreciate that to do this we would need urgent
legislative change, but it is required.
I thank my noble friend for raising those points. The 80%
guarantee on lending under the CBIL scheme is already extremely
generous and we have not seen a lot of evidence to suggest that
this is acting as a significant barrier for lenders. On his
suggestions, we are of course subject to the EU state aid rules.
Even though we have left the EU, under the terms of the
withdrawal agreement we still have to apply those rules.
(Lab)
My Lords, so that lessons can be learned and in the spirit of
more transparency, will the Government ensure that financial help
given under these schemes will be clearly disclosed and not
buried in business accounts, so that in time we can assess what
was achieved in supporting jobs, businesses and indeed the
community?
I fully support the noble Lord in his desire for transparency. It
is important that companies disclose this information so that we
can see how successful the schemes have been.
(LD)
My Lords, will the Government take up the proposal made by my
colleague to set up a website for lenders
and products in the various support schemes along the lines of
Compare the Market, so that firms can quickly identify which
lenders would be willing to lend to them? They can then approach
that institution and get money much more quickly.
I thank the noble Baroness for that suggestion, but the British
Business Bank’s finance hub already provides full details on
CBILS and our other loan guarantee schemes, including all details
of accredited lenders. In addition, businesses may use one of the
BBB’s designated online referral platforms, which may help them
to find finance providers offering the product they are looking
for.
(Con)
My Lords, I declare my interests as shown in the register. Under
the British Business Bank’s revised eligibility guidelines,
start-up companies whose losses have been financed by
shareholders through long-term loans are ruled ineligible under
EU state aid rules, which define companies whose accumulated
losses exceed half their paid-in capital as “undertakings in
difficulty”. That is the case even when they turn profitable and
their accounts have been signed off as going concerns. Does the
Minister not agree that the BBB should allow lenders to apply
more flexible eligibility criteria to companies carrying
long-term debt, which is in effect a form of capital, and that
the EU definition of many such companies is misleading and
inappropriate?
We are constantly reviewing the loan guarantee schemes to make
sure that as many businesses as possible can benefit from them.
That is why we made the changes that I referred to earlier in the
week. As I said to an earlier questioner, although the UK has
left the EU, under the terms of the withdrawal agreement we are
still subject to EU state aid rules.
(Lab)
My Lords, does the Minister agree that once the current, very
welcome, liquidity initiatives to soften the supply shock to the
UK economy have done their work, it will be necessary, as in
other economic downturns, to bring forward plans to stimulate
demand and to deal with rising unemployment? Will the Minister
confirm that such plans are being developed and can he share with
us the likely timing?
Of course, at the moment we are focused on delivering the support
that businesses need now, but we will continue to monitor and
review all the schemes, now and in the future, to make sure that
they are working effectively and helping businesses to get the
support they need.
(LD)
Is the Minister aware of reports that some banks are requiring
companies to freeze all loans and leasing with other financing
institutions before agreeing loans, and that some are charging
for personal contact despite arrangement fees being picked up the
Government? Is such conditionality and charging allowed?
The noble Baroness makes a good point, but we have provided a
generous guarantee scheme and we fully expect that all businesses
will benefit from such schemes and that banks pass on the savings
to borrowers. We have removed the forward-looking viability test,
as I said earlier, but we constantly monitor all these schemes
and seek to improve them where possible.
(Con)
My Lords, to what extent have the Government involved our
fantastic fintech sector and would they consider setting aside a
certain percentage of funds for fintechs to distribute, bringing
much-needed pace and efficiency to the process?
My noble friend makes a very good point—fintech has a significant
role to play. Funding Circle, as he will be aware, was recently
added as a CBILS accredited lender. Along with other alternative
finance providers, it will help even more businesses to access
the finance they need at this difficult time.
(Con)
Will my noble friend comment on the interest rate charged on the
loans and say whether there is a cap on that rate? Are penalties
allowed for early repayment, which would obviously be detrimental
to the future of firms? Also, following on from the suggestion
made by my noble friend , is there any
intention to help firms by providing finance for equity
investment rather than debt only?
The business interruption payment means that the borrower
benefits from no fees or interest in the first 12 months.
Interest rates are then charged at the discretion of each lender.
However, under the terms of the state aid agreement, the
Government fully expect that the benefits of the guarantee under
CBILS is reflected in the interest charged by the lender both
during the period of the business interruption payment and
thereafter, for the remainder of the facility.
